Understanding market correlation: Polkadot (Dot) and trade strategy testing
In the world of cryptocurrency, market correlation refers to the relationship between two or more assets on a specific market. This concept is necessary for trade because it helps investors understand how another other way interacts with each other, which can significantly affect their investment decisions. In this article, we will examine the concept of market correlation and examine its importance in polkading (Dot) – decentralized on the platform, which allows you to link different blockchain networks.
What is market correlation?
Market correlation measures the degree of two or more actively moving together in response to changes in the basic markets. This is calculated by dividing the cowariacia (changes in one variable, when the other variables change) with each product of the standard variable deviation). The high level of correlation indicates that the assets are closely related, while the low level of correlation suggests that they are less related.
Polkading (Dot) and market correlation
Polkadot is a decentralized platform that allows various blockchain networks to work together, enabling the creation of new applications and services. Of the over 10,000 assets around the world, Dot has become one of the most frequently traded cryptocurrencies.
Studies have shown that the correlation of the police market with other assets such as Bitcoin (BTC) and Ethereum (ETH) is important. The study, published in the Financial Economics magazine, turned out to be closely related to the BTC price with the 0.63 correlation coefficient in Polkad. Similarly, another cryptozone study showed that the price of the given is positively correlated with the price of ETH.
Trade strategies based on market correlation
Understanding market correlation is necessary to develop effective trade strategies on the cryptocurrency market. Here are two popular commercial strategies based on the correlation of the police market:
1
long/short prejudice : This strategy includes the purchase of an active one when they are expected to work poorly, such as the poor market correction and their sale when they are expected to be fine, for example during a strong bull.
In the context of Polkade, this strategy can be associated with points when it trades at a low price with BTC and ETH, and their sales increases as far as it increases. The purpose of this approach is to use a correlation between two assets observed in previous studies.
- average reverse : This strategy includes the identification of excessive or selling active conditions and plants to return to normal values based on market expectations.
The correlation of the Polkadt market with BTC and ETH makes it the main candidate for medium opposite strategies. Kryptozone study showed that the price given often achieved the same trend as BTC, which indicates a high level of correlation between two assets.
Application
Understanding market correlation is necessary for investors in the space of cryptocurrencies, in particular when developing Polish -based commercial strategies (Dot) and other assets. By analyzing the correlation between various assets, buyers can get insight into possible price movements and make deliberate investment decisions. In this article, we showed how to examine market correlation using Polkading data operations and identified two popular commercial strategies based on this concept.
Suggestions
Based on the analysis of our market correlation, here are some suggestions for traders:
- Supervise the correlation between Dot and other assets such as BTC and ETH, to identify possible trade options.
